Tuesday, 8 November 2011

What St Paul's staff might have said - the Christian answer to the financial crisis

(Update: a shortened version of this, suitable for parish magazines, has now been posted.)

What’s wrong with the world’s financial markets is not rocket science, but the technical issues
involved may look like it.

In April 2007, a young English financier named Henry Maxey published an article titled
‘Cracking the Credit Market Code’* which explained precisely why we were heading then for
where we are now. To the outsider, however, his account of ‘credit’ and ‘leverage’, ‘liquidity’
and (above all) ‘collateralized debt obligations’ is completely baffling.

But take heart! It is not just the outsider who fails to understand the problems. In an explanatory
note, Maxey likened the global system to a perpetual motion machine. Such machines are
impossible, yet hundreds have been designed. (Indeed as a schoolboy I worked out that if a water
wheel pumped water into a pond that then fed back to the water wheel, it would keep turning
forever!)

The problem with debunking such inventions lies in working out exactly where the energy loss
occurs (there always is one). In the same way, Maxey argued there was a slight ‘skew’ in the
various cogs of newly-emerged financial markets which was hard to detect, but which meant the
whole thing was bound, eventually, to run out of steam.

The market in collateralized debt, Maxey said, looked for all the world like Willy Wonka’s
gobstoppers: “You can suck ‘em and suck ‘em and suck ‘em, and they’ll never get any smaller”
(202). The money would keep on making profit. The trouble was, most people couldn’t see the
fallacy. The credit bubble, “was the financial world’s own perpetual motion machine, yet the
ridicule was reserved for those who questioned the legitimacy of ‘almost rational’ components
and warned about the absurdity of the output.” (184)

So if mere mortals couldn’t understand it and the experts couldn’t see (or wouldn’t admit to) the
problem, how could it have been avoided?

Cue the Church of England, which was briefly pushed into the limelight when the grounds of St
Paul’s cathedral were occupied by people protesting at the global financial crisis. Unfortunately,
instead of coming out with their lines, the clergy suffered a collective bout of stage-fright!

As a result, a great opportunity was lost to declare a clear and unequivocal Christian response.
But what, you might ask, should such a response look like, given the complexity of the issues
outlined above? As it happened, the cathedral had been about to publish its own survey of
business ethics, but all this was lost sight of in a welter of resignations and recriminations. The
best thing it seemed to be able to come up with was the Archbishop of Canterbury’s support for a
new ‘Robin Hood’ tax — in other words, another financial instrument to add to the pile.

Yet what would be a specifically Christian response to the crisis? The first answer in any realm
of public responsibility surely lies in the model Jesus Christ set before his followers, of the Son
of Man “who came not to be served, but to serve”.

I always remember a lecturer many
years ago who argued that this ought to be the guiding
principle of Christians involved in the arts. The first goal of the
artist, he said, should not be self-expression but service of others.
Yet this can apply to financiers as much as to artists. The
guiding principle should always be not “How can I serve my own ambitions (for money, fame, fulfilment or whatever)?” but,
“How can I best
serve others?” In every occupation and relationship, those who claim to
follow Christ should
follow his example and command of being “the servant of all”.

After that, there are the basic principles of honesty and integrity. And this is not just a matter of
personal or private morality. “By justice a king gives a country stability,” says the book of
Proverbs, “but one who is greedy for bribes tears it down” (29:4). In the end, bribery and
corruption destroy businesses and communities.

But someone will say, “This is impossible — in the hard world of business, it’s dog eat dog.” To
this, we can only reply, do you want to live like an animal, or like a human being made in the
image of God? Do you want to follow the herd, or follow the Master? If people ask what the
Christian ‘take’ is on something as profound as global finance, they must not complain if the
answer turns out to be simple to define but hard to apply. Maybe that’s life.

John Richardson
8 November 2011

* In J Ruffer, Babel: The Breaking of the Banks, A Chronicle of the Markets 1998-2009 (Hindringham: JJG Publishing, 2009), 184-247

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1 comment:

It is not too late for the Christians to get involved. I agree with you. The Christians and the Occupation are strange allies but allies nonetheless by a vast and strange historical accident (if you believe in accidents like this). I truly think we ignore this alliance at our own peril - both the church and the activists at the core of the Occupation have been calling out for justice in their own ways for years and it has not been effective- look at the position we are in now. But we can rise up together and build a bridge between these spirit-led movements, and claim justice for the weak. Claim in the name of God, Allah, Freedom, Country - I don't care - but stand against this government together! I have an idea for a winter carnival bringing together the Occupation and the Church. Are you in? With love and hope from the Occupation